What are the characteristics of a real business opportunity?

This was the textbook I used to teach the Business Organization course and the Business Management course in the Business Academy at San Pedro High School in Los Angeles Unified School District (LAUSD). The cover is different, because it is now in the 11th edition, and I taught out of the 10th edition. But it’s essentially the same book.

At any rate, this free sample chapter from the textbook I used to teach my students just happens to be my favorite chapter in the book. In fact, I believe it is actually the most important chapter in the book. It’s interesting to note that this also just happens to be the free sample chapter that is provided by the publisher.

The main point of the chapter is the importance of being able to discern the difference between a real business opportunity and a so-called “great” business idea.

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Simply put… Not every idea is an opportunity.

Opportunity Recognition

The following is an excerpt from the Entrepreneurship textbook.
You will find this on page 148:

You can ask yourself five questions to begin the process of determining if a business idea might be a good business opportunity. If the answer to any of these questions is “no,” there is a good chance that the idea is not a real business opportunity. (As you read this book, you’ll discover practical ways of answering these questions.)

Does the idea fill a need or want that’s not currently being met?

Will the idea work in the location or in the way that you plan to sell it?

Can you put the idea into action within a reasonable amount of time—that is, before someone else does or while resources are still available? This concept is called the window of opportunity: the period of time you have to act before the opportunity is lost.

Do you have the resources and skills to create the business (or know someone else who could help you do it)?

Can you provide the product or service at a price that will attract customers but still earn a reasonable profit?

The important thing to remember, of course, is that you need to have a system for qualifying business ideas carefully. Once again, not every business idea is truly a business opportunity. Locating a product, service or idea that is in demand is the first step. That is what we call market research, and you simply can’t skip that step if you want to be successful.

Among the five questions presented above, number 5 is the final qualifier that determines whether a venture is truly worth your time. What we are talking about at this point, of course, is profit margin. Every business owner knows that you can have a few “loss leaders” to get people in the proverbial door. But at the end of the day, something that you’re selling has got to have a reasonable profit margin. Otherwise, you will have to close your doors.

Makes sense, right?

You have to begin with demand. Then you locate dependable suppliers. But if you forget about margin, then you are just spinning your wheels.

Now once you have demand, suppliers and margin firmly in place, you proceed with your marketing. Marketing is basically anything and everything that you do to promote your business. Marketing is promotional in nature and it is different from sales, because the sales process is focused more specifically on closing and processing the actual transaction.

So marketing puts your product where people can find it. If you have already established that there is demand, then marketing also puts your product where they are actually looking for it.

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